Next raises guidance but warns of staff shortages

Next has raised its full-year guidance following a strong performance in its half-year results, and now expects its profit-before-tax to be £800m, up 6.9% against 2019, £36m ahead of its previous guidance of £764m. The group also anticipates its full price sales guidance for the rest of the year to be up by around 10% against 2019, while its year end debt is now forecast at £610m, a reduction of £502m against two years ago. It comes as its pre-tax profit rose by 5.9% to £347m in the half-year ended July 2021, with brand full price sales up 8.8% against 2019 and 62% against 2020. In the last eight weeks alone, Next reported that full price sales were 20% higher than 2019, compared with its previous guidance of 6%. Online sales were up by 52% to £1.5bn during the period as customers continued to shop online during the pandemic, whilst retail sales were down by 38% against the same period in 2019. In its latest results, the group noted it has not escaped the effects of recent supply chain disruptions, with stock levels currently lower than planned and 12% down on two years ago. Next said these stock levels are “far from optimal” and have “noticeably” affected sales in some categories and in stores. Nonetheless, it said its recent “over-performance” would imply that the business as a whole has not materially suffered due to this, citing the amount of choice that is still available to its customers through its website. In addition, Next said the situation is currently improving and it now expects stock to return to more normal levels by December. As well as warnings regarding stock levels, Next also reported that the average selling price inflation in the current season is running at around 2%, largely driven by rising shipping costs. However, it said this was “not enough to materially restrain sales”, and believes that next year, inflationary pressures in shipping will begin to ease. While the group has not yet experienced difficulties in recruiting staff, particularly in its stores, it reported concerns over staffing for the seasonal period in both warehousing and logistics. It said that without the contribution of overseas workers to assist with these peaks around Christmas, it suspects customer deliveries may take longer to arrive over the peak trading season. In its latest published report, Next said: “The combined effect of pent-up demand for clothing, record savings ratios, and far fewer overseas holidays has materially boosted sales in recent months. The impact of these factors must inevitably diminish as time goes on. “It also seems likely that increases in the cost of living, along with the potential effect of seasonal labour shortages on our delivery service, may moderate demand in the months ahead.”